ISRAELI HIGH-TECH FIRMS MAY SUFFER MOST FROM ASIAN MARKET WOES
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December 22, 1997 2:49 PM
DOW JONES ONLINE NEWS
ISRAELI HIGH-TECH FIRMS
MAY SUFFER MOST FROM
ASIAN MARKET WOES
JERUSALEM -(Dow Jones)- The Asian markets crisis
is liable to hurt certain Israeli high-tech companies and
other exporters, dampening Israel's overall economic
growth in 1998, economists said Monday.
And though economists already are trimming growth
forecasts for 1998, the Israeli economy as a whole
shouldn't suffer too much from Asia's problems. That's
because Asia ranks third behind the U.S. and Europe as
a destination for Israeli exports. It's also because of the
type of goods Israel sends abroad.
Economists now expect the Israeli economy to grow
between 2.5% and 2.7% in 1998, down from 3.0%
growth anticipated before the East Asian turbulence.
But in some sectors of the economy, the concern is
worse.
One stock, Electronics for Imaging Inc. (EFII), fell
through the floor recently amid Asian turmoil. A maker
of products that transform color copiers into high-speed,
network-based color printers, Electronics for Imaging is
heavily exposed to the Japanese market. Its shares
plunged 62% in U.S. trading Dec. 12 after a warning
that fourth-quarter earnings will be 6 cents a share -
88% less than the projected 49 cents.
Other Israeli stocks with exposure to Asia have been
going down, too. Shares in Orbotech Ltd. (ORBKF), a
manufacturer of automated optical inspection equipment,
have dropped 53% in Nasdaq trading since making a
52-week high on Sept. 8.
Many Israeli high-tech companies have grown over the
past few years because of activity in Korea, Japan,
China and Hong Kong, which picked up as Mideast
peacemaking eased the Arab League boycott on
companies that do business with Israel.
Excluding exports of pollished diamonds and shipments
to China and India, only 10% of all Israeli exports go to
Asia.
Of the companies manufacturing that 10% of Israel's
exports to Asia, companies in the semiconductor sector
probably will be hurt worst, analysts said.
The concerns of Asian exposure have clearly affected
Israeli high-tech stocks that sell heavily to Asia, such as
========> Comverse Technology Ltd. (CMVT), ECI Telecom
Ltd. (ECLIF) and Tadiran Telecommunications Ltd.
(TTLEF), said Tim Luke, a telecommunications analyst
at Lehman Brothers in New York.
Israel's export growth is coming from electronics,
chemicals, metals, plastics and software, Bufman said.
It is the companies that do - or hope to do - business
heavily with South Korea that are in the greatest danger
of losing sales, analysts said.
"The biggest crisis is in Korea, and there are several
companies that do lot of business with Korea," such as
Tadiran Telecommunications Ltd., "and that of course
could hurt them in the short run," said Shlomo Kalish,
CEO of Jerusalem Global Ltd., a high-tech investment
consultancy.
Jonathan Rudick, a vice president at HK Strategy and
Finance Ltd., expects South Korean investment in
Israel's private equity market "won't stop immediately,
but it will be more selective and fundamentally more
strategic."
The Far East crisis could also indirectly affect Israel if it
causes economic activity in the U.S. and Europe to fall
off, Bufman said. "That will affect Israeli exports
because the majority of Israeli exports go to the U.S.
and Europe," he said.
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